Tremendous unmet clinical needs exist in musculoskeletal medicine. Novel strategies are urgently needed to promote bone formation and function safely in patients with severe osteoporosis or experiencing delayed-union or nonunion in fracture repair. A fundamental understanding of mechanisms governing osteoblast differentiation is critical for the development of such bone-enhancing strategies. Work from our laboratory and others has firmly established Indian hedgehog (Ihh), a member of the Hedgehog (Hh) family, as an essential regulator for osteoblast differentiation, chondrocyte development and cartilage vascularization during endochondral bone formation - the osteogenic process that directs both skeletal growth and bone fracture repair. However, although it is known that the Gli family (Gli1-Gli3) of transcriptional activators and repressors collectively mediate Hh signaling in mammals, it is not clear which Gli or what form (activator versus repressor) is responsible for each of the diverse functions of Ihh in the skeleton. Moreover, the role of Hh signaling in bone homeostasis and regeneration in the adult has not been elucidated. In the previous funding cycle of this project, by employing murine genetics we established the critical role of Gli3 - predominantly a repressor antagonized by Ihh signaling - in control of chondrocyte proliferation and maturation. Intriguingly, we uncovered that Ihh regulates both osteoblast and skeletal vascular development via mechanisms independent of the Gli3 repressor; this finding prompted us to hypothesize that an additional effector, most probably the activator form of Gli2, is required for mediating the role of Ihh in osteoblastogenesis and in cartilage vascularization. In the current proposal we will test the role of Gli2 activator in Ihh-mediated osteoblast differentiation and skeletal vascularization. In addition, we will test the potential roles of Hh signaling in bone homeostasis and fracture healing in adult mice.